The Nigerian National Petroleum Corporation (NNPC) has said that the existing price differential between the amount petrol is sold in Nigeria compared to its neighbouring countries is a major incentive for smuggling of the commodity across the borders.
Spokesman of the corporation, Garba Deen Muhammad, in a statement, quoted the Group Managing Director, Mele Kyari, to have said this during a presentation at an interactive session by the Joint Senate Committee on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
According to the statement, Kyari said concerted efforts by the corporation and some federal agencies to combat the menace of smuggling of petroleum products had been largely hampered by the current arbitrage situation.
It has always been the opinion of the NNPC that the current fuel subsidy regime remains unsustainable
The corporation said as of June this year, it was paying as much as between N120 billion and N140 billion monthly, with about N94 under-recovery per litre at the time.
With the country unofficially supplying the needs of some of the neighbouring countries through smuggling, the volume of the product leaving the shores of the country and by extension subsidy paid by the NNPC has continued to increase.
Kyari said with price difference of over N100 per litre now existing between what is sold in Nigeria and in countries surrounding the nation, it was difficult to monitor the activities of petrol smugglers.
He said even though the corporation, working in concert with other agencies, has made noticeable progress in combating the menace, the battle was yet to be won.
“As long as there is arbitrage between the price that you sell and what is obtainable elsewhere, you can be sure that it is very difficult to contain the situation,” the NNPC boss stated.
He emphasised that the activities of smugglers have also made it difficult for the country to determine the actual consumption figures for petrol, noting that the corporation can only know what was trucked out from loading depots across the country but cannot determine how much of that was consumed in-country.
On the MTEF assumptions, the GMD reiterated a base oil price scenario of $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024. These were predicated on a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024
